Friday, May 07, 2010

The Fate of Europe

[Winged Victory of Samothrace, after austerity measures]

The markets are agog over the fear that Greece will default on its debts, promptly followed by Portugal, Spain, and possibly Italy. There is tinkling in the back of everyone's memory the two words, "Credit Anstalt", the Vienna bank whose failure launched the Great Depression. Instead of a mere bank failure we have a whole country that has failed.

Even if Greece doesn't default, the austerity measures required to avoid default are expected to freeze credit markets in Europe almost indefinitely. Trillions of euros will have to be repaid and the borrowers will have severely distressed and deflated economies for years to come. Which will be a heavy drag on the economies of their partners in the European Union for years to come. And that is if they succeed in preventing the default.

I for one am optimistic. I think the European Union governments have shown themselves able to work together effectively in the past so they are sure to be able to deal with this crisis too.

Look at how well they have done in creating and adopting a constitution. Just because they still don't have one even after several tries, and the various versions keep getting voted down doesn't mean that the they won't eventually succeed.

Look how well they did in the Bosnian War in the 1990's. Scarcely 110,000 people were killed under their very noses because they were unable to agree on a policy. On the one hand 110,000 people seems a lot to have been killed when the Europeans had more than enough soldiers and arms to stop the massacres. But on the other hand look at how many Bosnians there still are. It's not like the Europeans messed up and got them all killed.

The same pattern of success was repeated in Kossovo a few years later. In the end ships and planes from North America were required to stop further large-scale massacres taking place on European soil. And that while Europe again had more than enough military power to prevent them. But again in spite of the massacres of Kosovars, Serbs, and Albanians, it is not as though there weren't still plenty left after the war.

Continental Europe will be aided in its deliberations by the new coalition government Britain is likely to have in a week or two. That government will give large voice to the Tories' coalition partners, the third-party Liberal Democrats, whom even their friends describe as "opinionated fools".

So having handled those problems so well, how can we doubt that the Europeans will be equally successful in managing a prolonged economic crisis? I'm sure they'll do fine.